No Pizzazz

An overview of U.S. employment data of the past two months clearly illustrates
that one cannot take the “headline” numbers at full value, but must look
inside the data…

to illustrate…

The American economy added 431,000 net new jobs in May, the largest jump in monthly
employment in 10 years—but wait a minute. Forecasters had expected the
addition of more than 520,000 net new jobs, with perhaps 200,000 new private-sector
jobs.

Instead, more than 95% of these net new jobs were temporary Census jobs, which
will be eliminated later this summer. Private-sector payrolls rose by a
disappointing 41,000 jobs.
The U.S. unemployment (jobless) rate declined from 9.9% in April to 9.7% in
May—but hang on. The rate declined for the wrong reason. The
jobless rate declined because an estimated 322,000 people left the labor force,
presumably because they were discouraged about the chances of finding a job.

Note that the nation’s unemployment rate had risen from 9.7% in March to
9.9% in April—on the surface a negative development—but sit tight.
The jump occurred primarily because an estimated 805,000 people entered the labor
force in April, presumably because they felt that employment prospects were improving.

Disappointing
The May employment report on balance was clearly disappointing to financial market
players and investors who had expected a clearer sign, a stronger validation of
renewed U.S. economic growth. Perhaps it will show up in the June data to be
reported on Friday, July 2.

When you pull out the 411,000 temporary Census jobs, there’s not much left in
the report to talk—much less cheer—about. The nation’s
goods producing sector added a miserly 4,000 jobs in May, versus an average of
60,000 net new jobs monthly in March and April.

The nation’s manufacturing sector did add 29,000 jobs during the month,
with hours worked and overtime increasing. However, this positive development
was more than offset by the loss of 35,000 construction jobs during the month.

Manufacturing has now added 126,000 jobs during the past five months.
(Another) however…the construction sector has lost two million jobs since
the Great Recession began in December 2007. Better news “saw”
logging and mining add 10,000 jobs in May.

The nation’s much larger non-government service providing sector
added 37,000 jobs during May, led by 22,000 net new jobs in professional &
business services. Education & health services added 17,000 jobs. Not
so attractive was the loss of 12,000 jobs in financial activities, nor the loss
of 7,000 jobs in retail trade.

Better Numbers
In addition to better news in the manufacturing sector, a few other data points
were worth mention:

The so-called “underemployment” rate, which includes the unemployed,
those working part-time who would prefer to work full-time, and those discouraged
workers who have left the labor force, dropped from 17.1% in April to 16.6% in May,
a significant decline of 0.5%

An estimated 343,000 workers who had hours involuntarily reduced during the past
year or two were returned to full-time status

The average hourly wage rose seven cents (up 0.3%) to $22.57 hourly in May, a rise of 1.9% over the past 12 months

The average workweek for private-sector employees rose from 34.1 hours in April to 34.2 in May. While the rise seems trivial, it is the equivalent of another 383,000 jobs in the economy

Year-to-Date
The economy has now added just under one million net new jobs this year, with roughly half of these jobs tied to the Census. Just as the 431,000 “headline” number overstated the true May employment picture, so will data in June and July likely be impacted the same way.

The flip side will occur later this year when the “loss” of nearly one million Census jobs will understate what is happening in labor markets at that time. No question that the Administration and the Congressional leadership already fear how the employment data will appear in the months leading up to the November elections.

The gain of nearly one million jobs so far this year also pales versus the loss of more than eight million jobs during 2008 and 2009. It will take years to reach 2007’s year-end employment level.

The Unemployed
As noted, the jobless rate did decline from 9.9% in April to 9.7% in May, matching the rate during January through March of this year. The components are noted below:

The jobless rate for men ages 20 and over declined from 10.1% in April to 9.8% in May

The jobless rate for women ages 20 and over dipped from 8.2% in April to 8.1% in May

The jobless rate for teenagers (16 to 19 years) rose sharply to a European-style 26.4% in May, a rise of a full 1.0%

The jobless rate for Whites declined from 9.0% in April to 8.8% in May

The jobless rate for Blacks or African Americans fell sharply from 16.5% in April to 15.5% in May

The jobless rate for those of Hispanic or Latino ethnicity declined slightly from 12.5% in April to 12.4% in May

The most troubling statistic is the harsh reality that roughly 46% of the 15 million people now counted as unemployed—6.8 million people—have been so for six months or longer, a record high. Job prospects for millions of people with prior employment in construction and manufacturing will remain very weak.

From Here?
A modest U.S. economic recovery has been in place since perhaps the late summer of 2009. To what extent the European upheaval will damage the U.S. rebound is unclear. To what extent the 2011 hike in income, dividend, and capital gains tax rates for “successful” Americans will damage their interest in hiring additional workers also remains unclear…